Comments on: Taxinomics: How Not to Run an Industry http://www.showmedaily.org/2009/09/taxinomics-how-not-to-run-an-industry.html Advancing liberty with responsibility by promoting market solutions for Missouri public policy Thu, 24 May 2012 06:15:06 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: Josh Smith http://www.showmedaily.org/2009/09/taxinomics-how-not-to-run-an-industry.html/comment-page-1#comment-3662 Josh Smith Mon, 28 Sep 2009 14:49:14 +0000 http://www.showmedaily.org/?p=7216#comment-3662 It is certainly the case that some number of people will shift from taxis to any one of many substitute services, such as buses, The L, calling a friend, etc. The cabbies are not necessarily performing the economic calculus of supply and demand necessary to determine what effect this change will have on their total revenue. However, there is reason to believe that people who take taxis do it because it is often quite a bit more convenient than the options listed above in a number of scenarios, and thus it may be that demand is sufficiently inelastic that a rise in price will cause a rise in revenue. And given that some number of customers prefer taxis for whatever reason, and the city has set up barriers to entry, until those barriers are reduced, it may be possible for taxi drivers to earn monopoly profits. It is certainly the case that some number of people will shift from taxis to any one of many substitute services, such as buses, The L, calling a friend, etc. The cabbies are not necessarily performing the economic calculus of supply and demand necessary to determine what effect this change will have on their total revenue. However, there is reason to believe that people who take taxis do it because it is often quite a bit more convenient than the options listed above in a number of scenarios, and thus it may be that demand is sufficiently inelastic that a rise in price will cause a rise in revenue.

And given that some number of customers prefer taxis for whatever reason, and the city has set up barriers to entry, until those barriers are reduced, it may be possible for taxi drivers to earn monopoly profits.

]]> By: Christine Harbin http://www.showmedaily.org/2009/09/taxinomics-how-not-to-run-an-industry.html/comment-page-1#comment-3661 Christine Harbin Sun, 27 Sep 2009 18:26:12 +0000 http://www.showmedaily.org/?p=7216#comment-3661 Have the cabbies considered the consumers' response to this rate hike? It could have an opposite-than-desired effect. It's probable that a rate hike would decrease ridership and consequently reduce their revenues. Chicagoans will increasingly choose to take substitute forms of transportation (e.g., the subway, the bus, walking) as they become relatively cheaper. And, according to one taxi driver who is quoted the article, ridership is already down by forty percent. Have the cabbies considered the consumers’ response to this rate hike? It could have an opposite-than-desired effect. It’s probable that a rate hike would decrease ridership and consequently reduce their revenues. Chicagoans will increasingly choose to take substitute forms of transportation (e.g., the subway, the bus, walking) as they become relatively cheaper. And, according to one taxi driver who is quoted the article, ridership is already down by forty percent.

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